So The Worry Is That Greece Defaults

Stratfor does political and economic analysis for business and governments.

Greece s lack of economic power makes it harder for it to pay back loans. Richard DeKaser of the Parthenon Group in Boston, says, if the Greek government cannot repay its loans, it will hurt lenders, who in turn will have trouble repaying loans they have taken out from other financial institutions.

So the worry is that Greece defaults, certain banks take losses, those losses affect counter-party banks, the entire banking system goes into contraction (shrinks), DeKaser said.

With banks less able and less willing to make loans, economic activity slows or even stalls.

American Enterprise Institute economist John Makin says Greece s economic and political issues could force it to leave the group of nations that use the euro. He says that makes investors and lenders worry about other euro member nations with heavy debts.

People start asking, if Greece leaves, what about Spain? They are experiencing some of the same symptoms. What about Portugal?, Makin said.

Worried investors and lenders will make fewer loans to nations that seem to have Greece s troubles. That perceived increase in risk means borrowers will have to pay higher interest rates to get loans, sharply raising their costs and hurting growth.

Many economists say a Greek default could do serious harm to many economies. But Greece s problems have been well-known for some time, allowing lenders and others to sell off risky Greek investments, reducing the potential damage.

Richard DeKaser also says a political accommodation might also ease the crisis.

I think the most likely scenario is that we get another muddle through compromise, DeKaser said.

He obd2 spain says protesters and angry voters have sent a message that austerity measures have been herramientas de diagnostico too severe and officials may become more flexible as they seek a way out of the crisis.

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Turkish forces are patrolling around the Syrian border Friday subsequent a lethal attack before this

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